freecoasters evolved from coaster brakes hubs.
with a coaster brake hub, you pedal forwards and the bike goes forwards. but when you pedal backwards, the brake mechanism will engage. however, if you roll the bike backwards, the pedals will stay in the same place and not go backwards like a normal cassette or freewheel hub would.
not having the cranks move while rolling backwards helps alot with flatland freestyle. but coasterbrakes suck, so what they did was simply remove the brake pads from the hub and put in some washers to take up the space.
now when you pedal your coasterbrake hub backwards, there are no brake pads so your cranks can pedal backwards just like a cassette/freewheel. when you pedal forwards, the bike goes forward.
the current versions of freecoaster hubs are much much better then the older converted coasterbrake hubs. but they work in the same mechanical matter.
the downside to freecoasters is there is a small amount of play. when you go from pedaling backwards to pedaling forwards, it takes the hub awhile to engage. with the new hubs, you can adjust this but you can't ever really get it to be as quickly engaging as a cassette/freewheel.